Event _: Mm Gong Si Ry released its semi-annual report on the evening of August 24]. 2017H1 achieved revenue of 396 million yuan, a year-on-year increase of 35.19%, net profit of 39.22 million yuan, a year-on-year increase of 7.54%, net profit of 30.58 million yuan, and a year-on-year increase of 41.99%. New combine harvester models were launched on a large scale, and performance grew rapidly: 2017H1 achieved operating income of 396 million yuan, an increase of 35.19% over the previous year, net profit of 39.22 million units, an increase of 7.54% over the previous year, and deducted non-net profit of 30.58 million yuan, an increase of 41.99% over the previous year. The main reason for the rapid increase in the company's performance was that the company's main product, the new model of the combine harvester, was promoted to the market on a large scale and received recognition. 2017H1's combine harvester business achieved revenue of 349 million yuan, accounting for 88.51% of the company's revenue, an increase of 50.18% over the previous year, and gross margin of 24.48%, an increase of 2.27% over the same period last year. The increase in gross profit was mainly due to increased sales volume and reduced cost sharing for a single product. The product chain is gradually taking shape, creating a full-process mechanized agricultural machinery provider: In 2016, the company entered the field of balers and cotton pickers through the acquisition of Starlight Yulong and Xingguang Zhenggong. The baler industry's growth rate has been above 20% in recent years. 2017H1 was affected by factors such as declining subsidy amounts, increased market competition, and rising raw material prices, and achieved revenue of 30.72 million yuan, a year-on-year decrease of 23.40%. Cotton pickers have huge market potential. Currently, the yield rate of domestic cotton is only 11.46%, but due to the current low level of domestic recognition of domestic cotton pickers, the company has slowed the pace at which Xingguang Zhenggong cotton pickers are being promoted to the market, and is increasing research and development efforts, focusing on improving performance and reliability. In addition, the company has achieved small-scale sales of rotary cultivators and tractors, and has also stocked up new products such as dryers and planters. The company's product hierarchy is gradually taking shape, and in the future, the company will become a fully mechanized agricultural machinery provider. The fixed increase continues to advance and accelerate the strategic layout of the industry: At the same time, the company issued a fixed increase plan (fourth revised draft), and plans to raise 559 million yuan at a price of no less than 18.37 yuan/share to raise 559 million yuan for the “annual output of 5,000 bundlers” and the “10,000 large and medium-sized tractors per year”. Through this fixed increase, the company will initially establish a mechanized industrial chain covering five major crop varieties, including rice, wheat, corn, cotton, and talent, covering the entire process of cultivation, harvesting and post-harvest processing, to provide customers with a package of delivery and after-sales services. The agricultural machinery industry has huge market space, and the company is expected to stand out from the industry: starting in 2004, the agricultural machinery industry has experienced a “golden decade” of development, and the overall market size has risen from 50 billion to 500 billion. Although the growth rate of the industry has slowed in recent years, the overall market size is still rising. As of 2016, the comprehensive mechanization rate of crop cultivation and harvesting has reached about 65%, and the target is around 70% by 2020. There is still room for improvement in the mechanization rate. In terms of the competitive pattern, the domestic agricultural machinery industry has a scattered structure, low market concentration, and no large-scale enterprises with international competitiveness have been formed. As a private enterprise, the company has great flexibility in terms of operation, management and incentive mechanisms, and is one of the few agricultural machinery enterprises with a listed company platform, which is expected to stand out from the industry. Profit forecast and investment recommendations: The company's revenue for 2017-2019 is estimated to be 753 million, 1,067 million and 1,440 million yuan respectively, EPS of 0.27 yuan, 0.44 yuan and 0.62 yuan respectively, corresponding to PE 73 times, 45 times and 32 times, respectively. Considering that the company's product hierarchy has been formed and development has entered the fast track, it has been given a “buy” rating for the first time. Risk warning: Competition in the combine harvester market is intensifying, and the expansion of the new product market falls short of expectations